Question

Discuss the disproportionate risk of holding inventory by retailers, wholesalers and manufacturers. Why has there been a trend to push inventory back up the channel of distribution?

Answer 1

Keeping inventory is dangerous because of the expenditure in tied-up money and the possibility for obsolescence. The type and magnitude of the danger vary according to the company's role within the supply chain. Inventories of producers are of a long-term nature. Their dedication to inventory is comparatively greater, and longer. Wholesalers have a larger reach than the producers, but a shorter length. Stock control is for distributors little more than a buying-selling cycle. .. Retailers have a broad product range and their expense of keeping inventories is usually greater than that of suppliers and wholesalers. The worth of the product in dollars is not income or gain. When the firms have a small inventory, they have enough resources to spend on acquisitions and other activities that will generate additional income rather than stay in a store, wholesaler and distributor warehouse. But essentially inventory viewed as cash just lying there without being used. And they tend to move the burden for inventory back into the funnel and escape those high costs